Garry R Harris v. Minister of National Revenue, [1985] 1 CTC 2363, 85 DTC 302

Sarchuk, TCJ:—This is an application made pursuant to the provisions of section 167 of the Income Tax Act for an order extending the time within which notices of objection may be served with respect to the applicant’s 1980 and 1981 taxation years.

The essential facts are not in dispute. By way of notices dated September 22, 1983, Mr Harris (Harris) was reassessed for income tax for these years. The day following receipt of the reassessments Harris attended at the offices of his accountants Meyers, Norris, Penny & Co where, following a consultation with a senior partner, he was referred to Mr N F Cochrane (Cochrane). After reviewing the file and considering the options available Cochrane advised Harris that the facts warranted the serving of notices of objection. Harris agreed and gave Cochrane specific instructions to proceed. It is clear that Harris was aware that there was a time period within which the notices had to be completed and forwarded.

Cochrane confirmed that he received these instructions. He was aware of the 90-day limitation period but, pending the receipt of certain bank statements, set the file aside, diarizing it for January 1984. As a result of this no action was taken with respect to the applicant’s file until after the limitation period had expired. When the file was brought forward Cochrane immediately recognized his error, consulted a tax partner in his firm and spoke to Harris. On January 6, 1984, (approximately 14 days after the expiry date) he mailed notices of objection to the Deputy Minister of National Revenue for Taxation. No consideration was given at that time to the making of an application for an order extending time. Cochrane’s stated reason for serving the notices of objection notwithstanding that the limitation period had expired was “on the chance that they might be accepted’’. Not surprisingly they were rejected. By the middle of February Revenue Canada had advised Harris that the documents were “late filed’’ but that an application for an order extending time could be made. Harris, although displeased with the turn of events, continued Cochrane’s retainer and instructed him to proceed. On August 30, 1984, some six months later, the application was eventually made. To explain this delay Cochrane said that in his several years of practice he had never proceeded beyond the objection stage and the error stemmed from his lack of knowledge and experience. As well he was aware that Harris personally was continuing discussions with officers of Revenue Canada with some expectation of a settlement and, in view of that, and acting on the belief that the application could be made at any time within a period of one year Cochrane felt under no constraint to move expeditiously. In response to questioning he candidly admitted that he was not familiar with the specific provisions of section 167 of the Income Tax Act and that he had not bothered to read them.

The Minister’s position is that the application should be dismissed because the applicant had failed to demonstrate that it was not possible to serve the notices of objection within the time otherwise prescribed and furthermore that once the failure to do so had been brought to his attention an application for an extension of time was not brought as soon as circumstances permitted.

There is no dispute that at all relevant times the applicant intended to pursue his right to object and if need be to appeal. The applicant’s basic position is that the failure to serve the notices of objection within the time prescribed and the subsequent failure to promptly bring the application for an order extending time resulted solely from the negligence of his accountant. It was argued that this negligence constituted an unusual circumstance and that it would be just and equitable to grant the order sought.

Counsel submitted that the purpose of section 167 of the Income Tax Act is to give this Court the same statutory power to relieve against penalties and forfeitures that all superior courts have, and such being the case it is appropriate for this Court to apply the same general principles expressed by other courts in similar circumstances. According to counsel for the applicant these principles are most clearly stated in Ross v Robertson, [1904] OLR 464 OCA; Murray Bowen v City of Montreal, [1979] 1 SCR 511, and in the judgment of Mr Justice Pratte for the Supreme Court of Canada in Cité de Pont Viau v Gauthier Mfg Ltd, [1978] 2 SCR 516.

In the Pont Viau case counsel served appeal documents on the wrong person and the error was not discovered until the appeal period had expired. Proper service was a condition precedent to the instituting of the appeal. The appellant applied to the Quebec Court of Appeal pursuant to the provisions of Article 523 of the Code of Civil Procedure of Quebec for an order extending the time within which the service could be effected, which application was denied. Article 523 reads:

The Court of Appeal may, if the ends of justice so require, permit a party to amend his written proceedings, to implead a person whose presence is necessary, or even, in exceptional circumstances, to adduce, in such manner as it directs, indispensable new evidence.

It has all the powers necessary for the exercise of its jurisdiction and may make any order necessary to safeguard the rights of the parties. It may even, notwithstanding the expiry of the delay allowed by article 494, but provided that more than six months have not elapsed since the judgment, grant special leave to appeal to a party who shows that in fact it was impossible for him to act sooner.

Upon further appeal, Mr Justice Pratte, speaking for the Supreme Court of Canada decided that the “impossibility” must be something less than the impossibility caused by a force majeure and must have reference to the party who bears the consequences of the appeal not being instituted, and not to another person deemed to be the party by “legal fiction” such as that party’s counsel. Mr Justice Pratte also held that if the impossibility to act sooner was the party’s own fault then the application ought to be refused.

The Bowen case arose from an action in unjust enrichment by the appellant as a result of an expropriation of his property by the City of Montreal and its subsequent resale at a profit. The trial judge, after permitting an amendment to the appellant’s pleadings at the close of the trial to include a claim that the expropriation had been a nullity, decided the case on the basis of the statutory prescription of the right of action without reference to the claim of nullity. The Quebec Court of Appeal upheld the decision, at which hearing counsel for the appellant did not argue the matter of nullity. On appeal to the Supreme Court, the matter of nullity was not included in the appellant’s factum, but he did refer to it in argument.

Mr Justice Pigeon dismissed the appeal with respect to unjust enrichment, but he found that the trial judge ought to have considered the claim of nullity and to have decided that that issue could not properly be heard without the impleading of the eventual purchaser of the land. He, therefore, referred the matter back to the trial judge to have the claim of nullity heard.

Mr Justice Pigeon dealt with the position of the appellant. On the principle that ‘‘a party must not be deprived of his rights on account of an error of counsel where it is possible to rectify the consequences of such error without an injustice to the opposing party” the Court allowed the appeal to the extent of giving the appellant 60 days within which to take the proper steps to implead the purchaser in the proceedings before the trial judge.

The principles stated by Mr Justice Pigeon in this decision arise from his interpretation of section 50 of the Supreme Court Act, RSC 1970, c S-19 which reads:

50 (1) At any time during the pendency of an appeal before the Court, the Court may, upon the application of any of the parties, or without any such application, make all such amendments as are necessary for the purpose of determining the appeal, or the real question or controversy between the parties as disclosed by the pleadings, evidence or proceedings.

(2) An amendment referred to in subsection (1) may be made, whether the necessity for it is or is not occasioned by the defect, error, act, default or neglect of the party applying to amend. RS, c 259, s 49, 50.

Both Article 523 of the Quebec Code of Civil Procedure and section 50 of the Supreme Court Act provide a wide base upon which the Court’s discretion may be exercised. For example Article 523 of the Code grants the Court of Appeal:

. . . all the powers necessary for the exercise of its jurisdiction . . . may make any order necessary to safeguard the rights of the parties. It may even notwithstanding the expiry of the delay allowed . . . grant special leave to appeal to a party who shows that in fact it was impossible for him to act sooner.

Section 50 of the Supreme Court Act permits that Court upon application any of the parties or upon its own motion, to “make all such amendments as are necessary for the purpose of determining the appeal or the real question or controversy between the parties as disclosed by the pleadings, evidence or proceedings’’. Indeed, by subsection (2) of section 50 the Supreme Court of Canada is expressly empowered to take such action whether or not the necessity for the action is occasioned by the conduct of the party applying to amend. As such the principles enunciated in Bowen and Pont Viau must be considered in the context of very broad statutory authority.

On the other hand section 167 of the Income Tax Act acts to restrict the manner in which this court may exercise its discretion. Although the court pursuant to the provisions of subsection 167(1) may “make an order extending the time for objecting or appealing where in its opinion the circumstances of the case are such that it will be just and equitable to do so’’ the exercise of that discretion is subject to the limiting provisions of subsections 167(2) and 167(5). Indeed subsection 167(5) provides, without equivocation that no order shall be made unless all of the prescribed conditions are met by the applicant.

For this reason I am of the view that the Bowen and Pont Viau cases are, to a degree, distinguishable since this Court does not have the same relatively unfettered discretion that the Supreme Court of Canada and the Federal Court of Appeal have.

Notwithstanding the foregoing this Court should not ignore the reasoning in those decisions. As Pratte, J suggested in Pont Viau to grant an order in circumstances such as these this Court should be able to find, at the very least, that the error or delay was due solely to the fault of applicant’s representative; that the applicant himself acted with all due diligence; and that there was nothing else the applicant could have done to act sooner.

In the present application the errors were, in the first instance at least, the result of the negligence of the applicant’s accountant. However, the applicant did not himself act with due diligence. Where an applicant knows that a document must be signed or some action taken within a prescribed period of time he retains the responsibility to ensure that those steps are taken. It is not sufficient for a taxpayer to simply turn the matter over to an accountant and to forget about it.

The principle that the granting of an extension under section 167 is the exception rather than the rule remains. The fact that the error has been committed by a representative or agent rather than by the taxpayer is but another circumstance to be considered. It would be wrong to imply that in cases where the delay is not the taxpayer’s fault an order will automatically follow.

In this case the applicant in light of the known carelessness of the accountants with respect to serving the notices, could and should have at the very least followed up on his instructions to ensure that the application for extension of time was served forthwith. I do not accept the argument that once a taxpayer has retained an accountant (or any other professional) he is no longer responsible to ensure that what has to be done is done within the time otherwise prescribed.

For the foregoing reasons the application is dismissed.

Application dismissed.